US mining giant faces fight
with rising Indonesia

As Indonesia transitions toward democracy and its economy flourishes, there is a growing sense that foreign operations like Freeport’s Grasberg mine have taken a lot from the nation, but given little back

By Olivia Rondonuwu / AFP, GRASBERG, Indonesia

Nevertheless, many indigenous Papuan tribespeople still live in the undeveloped province in grinding poverty.

There is little doubt over the environmental consequences of the Grasberg mine, which has produced vast quantities of gray “tailings” waste — material left over from ore separation — which stretch over an area of 230km2 and have scarred the otherwise beautiful landscape of rugged Papua.

Freeport insists that the tailings are harmless and is undertaking a project to grow plants, such as tomatoes, in the waste to back up its claim.

The controversy surrounding the complex has been heightened by a series of difficult episodes, from shooting deaths to industrial action.

Since 2009, 15 people have been killed in a spate of mysterious shootings by snipers hiding out in the mountains.

Freeport buses have now been fitted with armor and bulletproof glass and travel in convoy for safety as they transport workers. The site is guarded by hundreds of military and police sentries.

While some point to separatists as being behind the shootings — an insurgency has been simmering in Papua since it was handed to Indonesia in 1969 — others believe it may be the Indonesian military seeking to justify their presence and squeeze more money out of Freeport.

It also faces challenges from within. Thousands of contract workers staged a three-month strike in 2011 that crippled production, claiming they were the lowest-paid Freeport workers anywhere in the world. The action ended when the company agreed to a pay hike.

Despite all the difficulties, Freeport is determined to stick by Grasberg, the crown jewel in its empire.

During a visit to Jakarta in May, Freeport McMoRan chief executive Richard Adkerson described Grasberg as “a great asset for the country.”

“There’s no thought of walking away from this. No thought at all,” he added.

Despite voicing concerns, Freeport has signaled it is willing to comply with Jakarta’s demands, recently signing a memorandum of understanding to build copper smelters and agreeing to pay higher royalties on its exports.

While its stance has become tougher, the Indonesian government is unlikely to want to scare off such a big taxpayer.

Most observers have little doubt that Freeport’s contract will be extended and the company is in Indonesia to stay.

“My guess is Freeport will get what they want, but there might be conditions,” the government source said, adding that Indonesian politicians would be out to make money from any deal to fund campaigns for elections next year.